PPLI Changes an Asset’s Location

Moving Mount Everest

One goal of Private Placement Life Insurance (#PPLI) is to change an asset’s location. Can PPLI move Mount Everest? Not literally, but it does an excellent job of moving the assets of wealthy international families. Moving these assets where? Into a PPLI policy that gives these assets tax-deferral, asset protection, and passes them to beneficiaries as a tax-free death benefit.

We share with you Part II of Our Journey Together video that introduces PPLI and presents the six principles of Expanded Worldwide Planning (EWP): privacy, asset protection, succession planning, tax planning, compliance simplifier, and trust substitute.

Depending on the aims of the PPLI structuring, different sets of laws must be adhered to. For families that have a connection to the U.S., the IRS rules related to diversification and investor control must be followed. For clients with no connection to the U.S., these rules do not apply, and we must look to the country of the families’ tax domicile and the domicile of the insurance company for guidance.

This allows, in many cases, for PPLI structuring options not available to those families with a connection to the U.S. We have for you below the provisions of Barbados law that pertain to variable insurance. As you can read, they are simple, straightforward, and have few restrictions as to the assets that can be placed in a PPLI policy.

Many of our PPLI policies are written through companies domiciled in Barbados. Gregory J. Dean and Michael A. Heimos wrote a chapter in International Life Insurance, edited by David D. Whelehan, entitled, “A Jurisdictional Survey of the Asset Protection Merits of International Life Insurance and Annuities.” We quote from the section on Barbados.

“Barbados has sophisticated insurance laws rivaling any in the world, and a mature insurance industry, governed by the Insurance Act, 1996 (referred to in this section as the “Act”).  There are detailed provisions addressing generally defined long term business, group life, “industrial life insurance,” etc. The entirely of Barbadian insurance law is present in public legislation.

On August 17, 2001 the Governor-General of Barbados assented to several pieces of legislation that amend Barbados’ laws governing key aspects of banking, insurance and investment in the island. They are: the Companies (Amendment) Act, 2001-30; the International Business (Miscellaneous Provisions) Act, 2001-29; the Insurance (Amendment) Act, 2001-25; and the Exempt Insurance (Amendment) Act, 2001-27.

The acts allow for structures that are often seen as beneficial, if not necessary, for institutions in the offshore mutual funds, banking and trusts, captive insurance and commercial insurance industries to operate, in Barbados and elsewhere. As pointed out below, there also are aspects of the amendments regarding insurance that apply to the interests of local citizens and residents as well. The new acts are, largely, quite praiseworthy.”

Movable assets can be legally contested, especially in matrimonial disputes. We give you an article later on that is focused on just such a dispute.

Here is the section on Variable Insurance Business of the Barbados insurance code.

CHAPTER 310 INSURANCE

An Act to revise the law regulating the carrying on of insurance business in Barbados in order to strengthen the protection given to policyholders; to increase the capital and solvency requirements of insurance companies; to expand the existing regulatory framework to include the regulating of all insurance intermediaries; and to give effect to matters related thereto.

 

PROVISIONS RELATING TO VARIABLE INSURANCE BUSINESS

(5) The Supervisor may attach such further conditions to the issue of approval under subsection (1) as are relevant to the nature and class of the variable insurance business that the insurer intends to carry on including

(a) requiring the insurer to disclose to any applicant for a policy any one or more of the following:

(i) a statement of the investment policy of any separate account maintained in respect of such variable insurance policy including a description of the investment objectives intended for the separate account and the principal types of investments intended to be made, and any restrictions or limitations on the manner in which the operations of the separate account are intended to be conducted;

(ii) any restrictions or limitations on the manner in which the operations of such variable insurance policy are intended to be conducted;

(iii) a statement of the charges and expenses in respect of such variable insurance policy;

(iv) a summary of the method to be used in valuing assets in respect of which benefits under such variable insurance policy are to be determined; and

(v) illustrations of benefits payable under the variable insurance contract;

(b) requiring that any material contract between an insurer and suppliers of consulting, investment, administrative, sales, marketing, custodial or other services with respect to variable life insurance operations shall be in writing and provide that the supplier of such services shall furnish the Supervisor with any information or reports in connection with the services which the Supervisor may request in order to ascertain whether the variable life insurance operations of the insurer are being conducted in a manner consistent with this Act, and any other applicable law or regulation;

(c) requiring the insurer to furnish, in such manner and at such times or intervals as may be prescribed, such information relating to the value of benefits under the policies as may be prescribed, whether by sending notices to the policy-holders or depositing statements with the Supervisor;

(d) requiring that the variable insurance policy be in a specific form or contain such mandatory provisions as may be prescribed in any regulations;

(e) requiring that the insurer maintain reserves in addition to any reserves which the insurer is required to maintain under this Act;

(f) restricting the descriptions of property or indices of value of property by reference to which benefits under the policy will be determined in accordance with the regulations prescribed for such purpose; or

(g) regulating the manner in which and frequency with which property of any description is to be valued, for the purpose of determining the benefits, and the times at which reference is to be made for that purpose to any index of value of property in accordance with the regulations prescribed for such purpose.”

The disputed matrimonial asset that we mentioned earlier is a yacht, Dubai Court Overrules English Possession Order for Superyacht, and comes to us from the Society of Trust & Estate Practitioners (STEP) Industry News publication.

“Tatiana Akhmedova’s English court order against her Russian ex-husband Farkhad Akhmedov, vesting her with possession of his GBP350 million yacht, has been rejected by a Shari’a court in Dubai, where the vessel is currently detained.

The yacht, the MV Luna, is part of the GBP453 million financial remedy awarded granted to Mrs Akhmedova on their divorce in 2015. Ever since, her former husband, an oil tycoon, has been trying to put his assets beyond her reach. According to her lawyers, Withers, he hid assets in a Bermuda trust with the intention of evading his legal obligations to his wife, and launched a counter-claim that they had already divorced in Russia. This claim was only recently dismissed in a Russian court.

In December 2017, Haddon-Cave J in the England and Wales High Court set aside Mr Akhmedov’s dispositions of assets and money into the trust, in an unusual example of a court judgment that pierced the corporate veil. His bank accounts and other assets were frozen under worldwide freezing orders obtained in England, Liechtenstein and the Isle of Man. Haddon-Cave ordered him, and a Liechtenstein Anstalt that he controlled, to vest the yacht in his wife’s name to be sold on her behalf (Akhmedova v Akhmedov, 2018 EWFC 23 Fam).

By this time, Mr Akhmedova had sailed the Luna from its usual home in Turkey to Dubai, hoping to find some recourse through the Dubai legal system. Mrs Akhmedova thus applied to the Dubai International Finance Centre (DIFC) court for a freezing order against both Mr Akhmedov and the Liechtenstein Anstalt, in the hope that the DIFC would issue a court order recognised by the Dubai courts themselves. This order was granted, and later supported by the DIFC Court of Appeal, and Mrs Akhmedova applied to the Dubai courts for a precautionary attachment of Luna. This too was granted, enforcing the boat’s detention in Dubai.

However, Mr Akhmedov then filed a claim in Dubai that his dispute with his ex-wife was a matrimonial rather than one of commercial debt, and so should have been determined by the Dubai courts in accordance with Shari’a law.

In the latest development, the Dubai’s Court of First Instance has dismissed Mrs Akhmedova’s application for possession, and ordered her to pay expenses and legal fees. The vessel, meanwhile, remains in dock at Prince Rashid Harbour in Dubai.

A spokesman for Mrs Akhmedova said the significance and the substance of the Dubai court’s ruling are not yet clear, as all that has been handed down at this stage is the decision. An appeal will be considered once the full judgment together with reasons is available, the spokesperson said.”

PPLI structuring allows us to move an asset, not physically, but into a structure that allows all of the six principles of Expanded Worldwide Planning (EWP)to function. This gives wealthy international families enhanced privacy and tax benefits, and makes them fully compliant with the world’s tax authorities.

We welcome your thoughts and comments on how we can make this happen for you. You can share them at the bottom of this article or you can Contact Us for more information.

 

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by Michael Malloy, CLU, TEP, @ Advanced Financial Solutions, Inc

 

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How to Climb the Mountain of Happiness

PPLI Provides Steps Up the Mountain

Private Placement Life Insurance (PPLI) offers a structure that produces tax efficiency, enhanced privacy, and asset protection. In our opening quote, it can be likened to stepping up the mountain. PPLI is not a goal, but a financial structure that gives wealthy international families key elements of financial happiness.

“PPLI functions more like a trust, than a financial product.”

It is appropriate that this quote is from Confucius. For those unfamiliar with Confucius we will have a biographical sketch later on. What is also connected is Part I of a video that re-creates a presentation that I gave at The 4th FOA Family Think Tank Forum in Shanghai, China, which was held on the campus of Fu Dan University.  I was invited to speak by Ann Lee of the Wintel Law Firm in Shanghai.

The presentation is an introduction to Private Placement Life Insurance (PPLI), and the international tax planning concept of Expanded Worldwide Planning (EWP). The two-day conference was attended by attorneys, accountants, financial planners, insurance brokers, and other professionals who work with high net worth clients in China and the Far East.

First, we have a quote about PPLI from Senior Consultant, The Voice of the Investment Management Consultant.

“Private Placement Life Insurance (PPLI) is much more than an insurance policy. PPLI represents one of the most powerful vehicles available to the high net worth investor in the marketplace today.

PPLI enhances both wealth creation and wealth preservation. Wealth creation is the result of the tax-free growth of the assets in the insurance contract. Wealth preservation is a result of the death benefit paid from the insurance contract.”

Much is written about tax transparency. Many of those who champion tax transparency say that it will result in a system that is more equitable and fair. Will it result in greater happiness? The conclusion of this New York Times article, Happy ‘National Jealousy Day’! Finland Bares Its Citizens’ Taxes offers a different perspective.

“Shortly after 6 a.m. on Thursday, people began lining up outside the central office of the Finnish tax administration. It was chilly and dark, but they claimed their places, eager to be the first to tap into a mother lode of data.

Pamplona can boast of the running of the bulls, Rio de Janeiro has Carnival, but Helsinki is alone in observing “National Jealousy Day,” when every Finnish citizen’s taxable income is made public at 8 a.m. sharp.

The annual Nov. 1 data dump is the starting gun for a countrywide game of who’s up and who’s down. Which tousled tech entrepreneur has sold his company? Which Instagram celebrity is, in fact, broke? Which retired executive is weaseling out of his tax liabilities?

Esa Saarinen, a professor of philosophy at Aalto University in Helsinki, described it as “a fairly positive form of gossip.”

Finland is unusual, even among the Nordic states, in turning its release of personal tax data — to comply with government transparency laws — into a public ritual of comparison. Though some complain that the tradition is an invasion of privacy, most say it has helped the country resist the trend toward growing inequality that has crept across of the rest of Europe.

“We’re looking at the gap between normal people and those rich, rich people — is it getting too wide?” said Tuomo Pietilainen, an investigative reporter at Helsingin Sanomat, the country’s largest daily newspaper. …

Roman Schatz, 58, a German-born author, rolled his eyes, a little, at Finland’s annual celebration of its own honesty. “It’s a psychological exercise,” he said. “It creates an illusion of transparency so we all feel good about ourselves: ‘The Americans could never do it. The Germans could never do it. We are honest guys, good guys.’ It’s sort of a Lutheran purgatory.” …

Economists in the United States have shown great interest in salary disclosure in recent years, in part as a way of reducing gender or racial disparities in pay.

Transparency may or may not reduce inequality, but does tend to make people less satisfied, several concluded. A study of faculty members at the University of California, where pay was made accessible online in 2008, found that lower-earning workers, after learning how their pay stacked up, were less happy in their job and more likely to look for a new one.

A study of Norway, which made its tax data easily accessible to anonymous online searches in 2001, reached a similar conclusion: When people could easily learn the incomes of co-workers and neighbors, self-reported happiness began to track more closely with income, with low earners reporting lower happiness. In 2014, Norway banned anonymous searches, and the number of searches dropped dramatically.

“More information may not be something which improves overall well-being,” said Alexandre Mas, one of the authors of the University of California report. …

One of the great sports of National Jealousy Day is to publicly shame tax dodgers.

In 2015, Mr. Pietilainen found that executives from several of Finland’s largest firms had relocated to Portugal so that they could receive their pensions tax free. His reporting caused such a stir that the Finnish Parliament terminated its tax agreement with Portugal, negotiating a new one that closed the loophole.”

Now a little about the extraordinary life of Confucius from the Simple English Wikipedia. We found this section on Confucius suited our article better than the longer Wikipedia article.

“Confucius (born 551 BC, died 478 BC) was an important Chinese educator and philosopher. His original name was Kong Qiu or Zhong Ni. As a child, he was eager to learn about everything, and was very interested in rituals. Once he grew up, he worked as a state official who handled farms and cattle. Then he became a teacher.

Confucius lived in a time when many states were fighting wars in China. This period was called the Spring and Autumn period of the Zhou Dynasty. Confucius did not like this and wanted to bring order back to society.

Like Socrates, Confucius sometimes did not answer philosophical questions himself. Instead he wanted people to think hard about problems and to learn from others, especially from history. Confucius also thought that people should get power because they were good and skilled, and not just because they came from powerful families.

Confucius wanted people to think about other people more than about money or what they owned. However he also felt that there should be strong rules in society and that people needed to obey them. Confucius thought that there were five relationships people could have, and that they all had their own rules. Two people could be

  • Prince and Subject
  • Father and Son
  • Husband and Wife
  • Elder and Child
  • or Friends

These were traditional relationships called the ‘five prototypes’. Confucius said that in all these relationships, both people must obey rules. For example, a subject must obey a prince, but also a prince must listen to a subject and must rule him well and fairly.

Confucius said that people should only do things to other people if they would be okay with other people doing those things to themselves. This is sometimes called the Golden Rule and was also taught by Jesus Christ.

His students wrote down small stories about him, and things that he said. These were put together to make a book called “The Analects.”

At Advanced Financial Solutions, Inc. the mountain that we climb is the creation of unique asset structures for wealthy international families using PPLI. We welcome you to climb this mountain with us, and achieve a structure that can give you financial happiness. Please contact us today.

 

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by Michael Malloy, CLU, TEP, @ Advanced Financial Solutions, Inc

 

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Never Underestimate the Power of Persistence

PPLI Delivers Persistence

At Advanced Financial Solutions, Inc. in our quest to solve difficult client issues using Private Placement Life Insurance (PPLI) structuring, we have found that being persistent is a great benefit. Since we have clients throughout the world in diverse financial environments, our problem solving expertise is key to a successful outcome.

By way of analogy we give you an example from science. Have you ever wondered how water can travel from the roots of a tree to the top? Consider the height of coastal redwood trees in California, reaching up to 379 feet (115.5 m) in height (without the roots). Part of the solution is a persistent chain of water molecules that travel skyward to the top of these giant trees.

First let us give you some examples of being persistent in our PPLI structuring  for our clients.

Unique Solution #1

A Chinese family came to us for succession planning for offshore companies owned by the family. They wished to pass these offshore companies located in various parts of the world to their son, who is a green card holder residing in the U.S. Besides transferring the companies at the death of the wealth owner via a properly structured PPLI policy, the son wished to take the profits from the companies and invest them in real estate projects outside the U.S. We created a PPLI structure for the family that accomplished all of these aims. The PPLI structure also gave them tax-deferral on all the future revenue from the companies.

Unique Solution #2

An Israeli client who resides in Italy has a company where all the revenue is generated in Italy. He is also a U.S. green card holder, but spends very little time in the U.S. He had a Nevada company that did the processing of his customers orders which came from customers worldwide. The client wished to re-structure to lessen his U.S. tax burden which we accomplished for him using a 953(d) offshore PPLI policy.

Unique Solution #3

A young entrepreneur with worldwide holdings in sports, natural resources, gaming, and content management wishes us to check his compliance with FATCA and CRS. He is a U.S. green card holder as well as a UK resident, and citizen of an African country. He had created a dozen companies with excellent potential. We brought him into compliance with tax authorities worldwide with a PPLI structure. We gave his revenues a boost, because in the PPLI structure all the profits become tax-deferred. We protected his family with the low-cost death benefit of the PPLI policy.

We are grateful to Mark Vitosh of Iowa State University for his article in Scientific American which excellently explains how water can reach the top of the tallest trees in the world.

“There are many different processes occurring within trees that allow them to grow. One is the movement of water and nutrients from the roots to the leaves in the canopy, or upper branches. Water is the building block of living cells; it is a nourishing and cleansing agent, and a transport medium that allows for the distribution of nutrients and carbon compounds (food) throughout the tree. The coastal redwood, or Sequoia sempervirens, can reach heights over 300 feet (or approximately 91 meters), which is a great distance for water, nutrients and carbon compounds to move. To understand how water moves through a tree, we must first describe the path it takes.

Water and mineral nutrients–the so-called sap flow–travel from the roots to the top of the tree within a layer of wood found under the bark. This sapwood consists of conductive tissue called xylem (made up of small pipe-like cells). There are major differences between hardwoods (oak, ash, maple) and conifers (redwood, pine, spruce, fir) in the structure of xylem. In hardwoods, water moves throughout the tree in xylem cells called vessels, which are lined up end-to-end and have large openings in their ends. In contrast, the xylem of conifers consists of enclosed cells called tracheids. These cells are also lined up end-to-end, but part of their adjacent walls have holes that act as a sieve. For this reason, water moves faster through the larger vessels of hardwoods than through the smaller tracheids of conifers.

Both vessel and tracheid cells allow water and nutrients to move up the tree, whereas specialized ray cells pass water and food horizontally across the xylem. All xylem cells that carry water are dead, so they act as a pipe. Xylem tissue is found in all growth rings (wood) of the tree. Not all tree species have the same number of annual growth rings that are active in the movement of water and mineral nutrients. For example, conifer trees and some hardwood species may have several growth rings that are active conductors, whereas in other species, such as the oaks, only the current years’ growth ring is functional.

This unique situation comes about because the xylem tissue in oaks has very large vessels; they can carry a lot of water quickly, but can also be easily disrupted by freezing and air pockets. It’s amazing that a 200 year-old living oak tree can survive and grow using only the support of a very thin layer of tissue beneath the bark. The rest of the 199 growth rings are mostly inactive. In a coastal redwood, though, the xylem is mostly made up of tracheids that move water slowly to the top of the tree. Now that we have described the pathway that water follows through the xylem, we can talk about the mechanism involved. Water has two characteristics that make it a unique liquid. First, water adheres to many surfaces with which it comes into contact. Second, water molecules can also cohere, or hold on to each other. These two features allow water to be pulled like a rubber band up small capillary tubes like xylem cells.

Water has energy to do work: it carries chemicals in solution, adheres to surfaces and makes living cells turgid by filling them. This energy is called potential energy. At rest, pure water has 100 percent of its potential energy, which is by convention set at zero. As water begins to move, its potential energy for additional work is reduced and becomes negative. Water moves from areas with the least negative potential energy to areas where the potential energy is more negative. For example, the most negative water potential in a tree is usually found at the leaf-atmosphere interface; the least negative water potential is found in the soil, where water moves into the roots of the tree. As you move up the tree the water potential becomes more negative, and these differences create a pull or tension that brings the water up the tree.

A key factor that helps create the pull of water up the tree is the loss of water out of the leaves through a process called transpiration. During transpiration, water vapor is released from the leaves through small pores or openings called stomates. Stomates are present in the leaf so that carbon dioxide–which the leaves use to make food by way of photosynthesis–can enter. The loss of water during transpiration creates more negative water potential in the leaf, which in turn pulls more water up the tree. So in general, the water loss from the leaf is the engine that pulls water and nutrients up the tree.

How can water withstand the tensions needed to be pulled up a tree? The trick is, as we mentioned earlier, the ability of water molecules to stick to each other and to other surfaces so strongly. Given that strength, the loss of water at the top of tree through transpiration provides the driving force to pull water and mineral nutrients up the trunks of trees as mighty as the redwoods.”

In some ways we are taught to see scientific processes like this as an inevitable result of something–something ordinary. But an inevitable result of what? That is the point. From another perspective, it is the inevitable result of something miraculous. Let us call it the miraculous persistence of nature.

Advanced Financial Solutions, Inc. enjoys being persistent in finding PPLI structuring solutions for our worldwide client base. Please contact us for a unique solution to your asset structuring needs.

We invite you to put our persistency to the test!

 

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by Michael Malloy, CLU, TEP, @ Advanced Financial Solutions, Inc

 

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‘Home Is Where The Heart Is’

PPLI Brings You Home

Wealthy international families can create a tax compliant and enhanced privacy Home for their assets using Private Placement Life Insurance (PPLI). The concept of Home is a powerful one for all of us.

At this point in the digital age, you could consider a smartphone to be a type of Home for information. A smart phone can organize and personalize different elements of our lives to bring them to a place that gives us a sense of security much like a physical Home does.

We all like to arrange our contacts, notifications, sounds, and other features to suit our personal taste. The key word here is personal.

“PPLI can do the same for the assets of wealthy international families that are spread throughout the world.”

Our featured news article uses personal in another sense. We are widening our concept of Home to include ‘Home Is Where The Heart Is.’ For Kris Goldsmith what spurred him into action was misinformation that was being spread over Facebook about U.S. Veterans. This emotional element of Home can be a strong force in our lives.

“PPLI is a welcomed unifying element for the assets of wealthy international families.”

Let us review all that can be included in the assets of wealthy international families by visiting the Wikipedia page on Assets:

“In financial accounting, an asset is any resource owned by the business. Anything tangible or intangible that can be owned or controlled to produce value and that is held by a company to produce positive economic value is an asset. Simply stated, assets represent the value of ownership that can be converted into cash (although cash itself is also considered an asset). The balance sheet of a firm records the monetary value of the assets owned by that firm. It covers money and other valuables belonging to an individual or to a business.

One can classify assets into two major asset classes: tangible assets and intangible assets. Tangible assets contain various subclasses, including current assets and fixed assets. Current assets include inventory, while fixed assets include such items as buildings and equipment.

Intangible assets are non-physical resources and rights that have a value to the firm because they give the firm some kind of advantage in the marketplace. Examples of intangible assets include goodwill, copyrights, trademarks, patents and computer programs, and financial assets, including such items as accounts receivable, bonds and stocks.”

“With proper structuring most all the assets mentioned above can be included in a PPLI policy.”

Let us return to ‘Home Is Where The Heart Is,’ by following the trail of Kris Goldsmith in his search for disinformation as it related to the Vietnam Veterans of America. Our source is The Wall Street Journal article, Army Veteran Wages War on Social-Media Disinformation,by Ben Kesling and Dustin Volz. If you change the subject matter, Mr. Goldsmith’s search could be ours.

We all have topics that compel us to act in one way or another, if what we see on Facebook or in the media strike the right emotional cord for us. This emotional cord is ‘Home Is Where The Heart Is.’

Kris Goldsmith’s campaign to get Facebook Inc. to close fake accounts targeting U.S. veterans started with a simple search.

He was seeking last year to gauge the popularity of the Facebook page for his employer, Vietnam Veterans of America. The first listing was an impostor account called “Vietnam Vets of America” that had stolen his group’s logo and had more than twice as many followers.

Mr. Goldsmith, a 33-year-old Army veteran, sent Facebook what he thought was a straightforward request to take down the bogus page. At first, Facebook told him to try to work it out with the authors of the fake page, whom he was never able to track down. Then, after two months, Facebook deleted it.

The experience launched him on a hunt for other suspicious Facebook pages that target military personnel and veterans by using patriotic messages and fomenting political divisions. It has become a full-time job.

Working from offices, coffee shops, and his apartment, he has cataloged and flagged to Facebook about 100 questionable pages that have millions of followers. He sits for hours and clicks links, keeping extensive notes and compiling elaborate spreadsheets on how pages are interconnected, and tracing them back, when possible, to roots in Russia, Eastern Europe or the Middle East.

“The more I look, the more patterns I see,” he said.

Facebook’s response to his work has been tepid, he said. Company officials initially refused to talk with him, so he used a personal contact at Facebook to share his findings. Lately, the company has been more active.

Facebook didn’t respond directly to a list of questions about Mr. Goldsmith’s research, but a spokesman said the company had 14,000 people working on security and safety—double the amount last year—and a goal of expanding that team to 20,000 by next year.

In a statement, the spokesman said the company relied on “a combination of automated detection systems, as well as reports from the community, to help identify suspicious activity on the platform and ensure compliance with our policies.”

About two dozen of the pages Mr. Goldsmith flagged, with a combined following of some 20 million, have been deleted, often coinciding with Facebook’s purges of Russian- and Iranian-linked disinformation pages—including a separate crackdown by the company last week on domestic actors.

The determination and persistence of Mr. Goldsmith reminds us of how at Advanced Financial Solutions, Inc., we pursue all available avenues to successfully place assets into a properly structured PPLI policy. The results include both a fully compliant structure, and one that also produces enhanced privacy for the family, as for reporting purposes, the owner of the assets inside the PPLI policy becomes the insurance company.

You have an open invitation to find ‘Home Is Where The Heart Is’ with us. We welcome your comments and questions on how to find the right Home for your assets with Advanced Financial Solutions, Inc. by using PPLI. Please contact us today for an initial consultation at no charge.

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by Michael Malloy, CLU, TEP, @ Advanced Financial Solutions, Inc

 

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Tortoises Have Strong Shells

PPLI’s Tax Shield Is Even Stronger

The tax savings element of Private Placement Life Insurance (PPLI) is impressive. We invite you to reflect on your own attitudes toward tax savings by offering two articles on tax that appeared this week in the media.

The tax codes of most countries are a maze of regulations that require professional assistance to extract the most salient tax saving points.  PPLI is at the forefront of structuring techniques that take advantage of maximum tax savings, and at the same time, full compliance with the world’s tax authorities.

How does PPLI become the “leader of the pack” when it comes to tax savings?

This is summed up mostly in two words: Life Insurance. The life insurance laws in most countries are very tax friendly–one receives tax deferral for the investment component of a life insurance contract, and at the death of the insured person(s), the death benefit is passed tax-free to the beneficiary.

With PPLI you couple the life insurance component with an open architecture platform. What does this allow? This allows assets to be located almost anywhere in the world, and to have asset managers located in most jurisdictions in the world. PPLI structuring is a very powerful tool for wealthy international families, and is difficult to achieve with entity planning only–creating trusts, foundations, corporations, etc.

Now for our news articles that reveal interesting attitudes towards wealth and taxes. The first is from Bloomberg, Top 3% of U.S. Taxpayers Paid Majority of Income Taxes in 2016.

“Individual income taxes are the federal government’s single biggest revenue source. In fiscal year 2018, which ended Sept. 30, the individual income tax is expected to bring in roughly $1.7 trillion, or about half of all federal revenues, according to the Congressional Budget Office.”

Bloomberg looked into the 2016 individual returns data in detail for some additional insights illustrated in the chart below:

  • The top 1 percent paid a greater share of individual income taxes (37.3 percent) than the bottom 90 percent combined (30.5 percent).
  • The top 50 percent of all taxpayers paid 97 percent of total individual income taxes.”

 

 

Our next article is from The New York Times, How Jared Kushner Avoided Paying Taxes.

“Jared Kushner has a net worth of almost $324 million, and his company has been profitable. But Mr. Kushner, who is President Trump’s son-in-law and senior adviser, appears to have paid almost  no federal income taxes for several years running, according to documents reviewed by The New York Times.”

The article goes on to detail Mr. Kushner’s real estate investments, and how they result in a zero tax bill.

Ironic Fact

When one combines the salient points of these two articles, it is ironic to reflect that the wealthy are the ones who both pay the most taxes, and seek to save the most taxes. When anyone prepares their income tax return, wealthy or poor, do they seek to pay the most tax or the least? Many commentators criticize wealthy individuals and corporations for not paying their fair share of taxes. But what is this fair share? Who decides what a fair share is?

Thankfully, we don’t have to answer this question. Our goal is to maximize your investment gains through strategies that minimize your worldwide tax burden. Please send us your tax concerns and questions, so we can structure a plan that gives you all the tax savings elements of PPLI. You can share your experience and inquiries at the bottom of the page. Thank you.

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by Michael Malloy, CLU, TEP, @ Advanced Financial Solutions, Inc

 

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Educational Opposition

PPLI Enhanced Value

Private Placement Life Insurance (PPLI) greatly enhances the value of the assets of wealthy international families. This is accomplished through the six elements of Expanded Worldwide Planning (EWP) which we will present you.

First, let us explore enhanced value. One way to understand something is through understanding what is the opposite of a concept. So what is the opposite of what we call, PPLI Enhanced Value? A candidate might be a fraudulent financial scheme. One has come to light this week in a New York Times article, Where In The World Is Denmark’s $2 Billion? by Paul Caron.

From the Wikipedia page, International tax planning, we give you the six elements of EWP. As you read them, reflect on how they all assist in creating PPLI Enhanced Value.

Privacy

EWP gives privacy and compliance with tax laws. It also enhances protection from data breaches and strengthens family security. EWP allows for a tax compliant system that still respects the basic rights of privacy. EWP addresses the concerns of law firms and international planners about some aspects of CRS related to their clients’ privacy. EWP assists with the privacy and welfare of families by protecting their financial records and keeping them in compliance with tax regulations.

Asset protection

EWP protects assets with segregated account legislation by using the benefits of life insurance. This structure uses asset protection laws in the jurisdictions of residence to shield these assets from creditors’ claims. A trust with its own asset protection provisions can still receive additional protection with the policy.

Succession planning

EWP includes transfers of assets without forced heirship rules directly to beneficiaries using a controlled and orderly plan. This element of EWP provides a wealth holder a method to enact an estate plan according to his/her wishes without complying with forced heirship rules in the home country. This plan must be coordinated with all the aspects of a properly structured PPLI policy together with other elements of a wealth owner’s financial and legal planning.

Tax shield

EWP adds tax deferral, income, estate tax benefits and dynasty tax planning opportunities. Assets held in a life insurance contract are considered tax-deferred in most jurisdictions throughout the world. Likewise, PPLI policies that are properly constructed shield the assets from all taxes. In most cases, upon the death of the insured, benefits are paid as a tax free death benefit.

Compliance simplifier

EWP adds ease of reporting to tax authorities and administration of assets, commercial substance to structures. In addition, the insurance company is considered the beneficial owner of the assets. This approach greatly simplifies reporting obligations to tax authorizes because assets in the policy are held in segregated accounts and can be spread over multiple jurisdictions worldwide.

Trust substitute

EWP creates a viable structure under specific insurance regulations for civil law jurisdictions. It also creates a new role for commercial trust companies. In most civil law jurisdictions, trusts are poorly acknowledged and trust law is not well developed.  As a result, companies with foreign trusts in these civil law jurisdictions, face obstacles.

Now some excerpts from Paul Caron’s article describing what the Danish authorities call one of the greatest financial crimes in the country’s history. Denmark was defrauded $2 billion, which is the equivalent of a $110 billion dollar loss in the far larger U.S. economy.

“The country had fallen victim to a dubious financial maneuver at the intersection of the tax system and capital markets, a dizzyingly complex transaction known as a “cum-ex” trade.

The trade is focused on one of the dullest, most overlooked acts in any financial system — the request for refunds on taxes withheld on dividends. Under Danish law, the government automatically collects taxes on dividends paid out by companies to their shareholders. If the shareholders live in the United States, they are eligible for a refund on some or all of those taxes.

A tiny department in SKAT (the Danish IRS), run by one man, approved thousands of applications for refunds. Most of the applications were filed by self-directed pension plans in the United States, a type of retirement account for individuals.

But experts and lawyers familiar with the scheme say those people were fronts for cum-ex trades. Deploying a kind of financial sleight of hand, the trades made it appear as if the pension plans had purchased shares of Danish companies and paid taxes on the dividends. Neither was true.

To the Danes, it was a fraud, one executed and conceived by Sanjay Shah, a 48-year-old, London-born financier. With an assist from employees, he found the Americans, helped facilitate the applications and ended up with much of the money.

Mr. Shah denies any wrongdoing and through a publicist says he merely took advantage of a loophole. He now lives in Dubai, where he owns a $1.3 million yacht and a 10,000-square-foot villa with access to the beach. He has become Denmark’s national villain.

“You have this guy, living off fraud, it’s infuriating,” said Joachim B. Olsen, a member of the Danish Parliament and chairman of its Finance Committee. “The expectation of the Danish people is that we will go after him, no matter the cost.”

How is PPLI Enhanced Value the opposite of this deceitful fraud scheme? 

At the heart of PPLI structuring is a life insurance policy. A financial instrument common throughout the world, and familiar to most people. PPLI uses this common financial instrument to achieve the six elements of EWP, and this is done with full reporting and compliance throughout the world. This is achieved by respecting the laws and regulations of all jurisdictions involved in the transaction.

PPLI Enhanced Value achieves outstanding benefits by respecting the law and not abusing it as in the Danish fraud scheme.

Please let us know how we can give you PPLI Enhanced Value for your assets, and make the six elements of EWP work for you. We welcome your questions and comments. You can write you inquires at the bottom of this page or you can contact me directly.

 

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by Michael Malloy, CLU, TEP, @ Advanced Financial Solutions, Inc

 

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Time On Your Side

PPLI Produces Longevity Through Time

The stability of Private Placement Life Insurance (PPLI) in structuring assets for wealthy international families is a creation of how we look at the element of time. PPLI relies on the laws and regulations of insurance. These laws and regulations in most countries have been in effect for a longer period of time and are less subject to change than the tax codes in these countries.

When a new trend emerges frequently people line up on either side of the topic: some being in favor and others opposing this new trend. One such new trend for wealthy international families are the various citizenship by investment programs that are being offered by many countries. We will explore this trend, but first more on the workings of how PPLI can assist in the structuring of assets.

How does the element of time enter the picture? How does it add the stability that is currently being sought in the whirlwind of change brought about by FATCA, CRS, and the Registers of Beneficial Ownership?

This topic came into the light when I was reading a book that used first person interviews with various subjects to make certain points. I found the interviews lacked depth. Not particularly because they were poorly conducted, but just the fact that when you meet someone for the first time it is not the same experience as knowing a person for a long time.

In other words, one cannot form a deep, lasting friendship with someone unless one has known this person over some longer period of time. We can call this aspect of time duration or longevity. This aspect of time produces in us a certain feeling of comfort, much like returning to a habitual routine after a period of absence from it.

When we structure the assets of a family, we wish to bring them the comfort of having–Time On Your Side: knowing that the next generation will inherit assets through a tax-free PPLI death benefit. This is accomplished by using the time-tested body of insurance laws and regulations throughout the world.

The Economist article, “Selling citizenship is big business–and controversial,”  is in part disparaging of citizenship by investment programs because they are relatively new phenomenon, and somewhat outside the regulation of individual governments. Here are a few excerpts:

“To meet the demand for long-term visas and passports, more and more countries are flaunting their attractions. About 100 offer a “residence by investment” programme. Over a dozen offer citizenship—including five Caribbean island-states, Vanuatu, Jordan and, within the EU, Austria, Cyprus and Malta.”

 

“The industry, however, is under a cloud. It is suspected of commercialising and trifling with rights and privileges that patriots regard as sacred; and of making life easier for crooks and terrorists.”

 

“For the European Union in particular, the issue is delicate. It touches on one of the most “national” of competences—who lives in a country and bears its passport—yet has Union-wide consequences. An EU-member-country’s passport is also an EU passport; a “Schengen” visa grants access to 22 EU members and four other countries.”

 

“Both the EU and the OECD, a club of rich countries, are looking leerily at CRBI schemes. Later this year, the European Commission, the EU’s executive, is to publish a report on those offered by EU members. The industry fears the worst.”

 

At Advanced Financial Solutions, Inc. we are eager to put Time On Your Side, and hope you will take advantage of our many PPLI structuring programs that operate worldwide. Please let us know how we can help you achieve your aims in the area of privacy and tax minimization.

 

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by Michael Malloy, CLU, TEP, @ Advanced Financial Solutions, Inc

 

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McDonalds and Stray Dogs

PPLI Gives Tax Relief

Incongruities can be resolved in both form and substance with Private Placement Life Insurance (PPLI). We frequently learn best from examples that jolt our minds into new understandings. When I was running recently in the park across from my hotel in Shanghai, I saw several stray dogs playing. They were having a marvelous time frolicking about on the lawn in between the beautiful, mature trees in the park.

These dogs had no sense that they were strays and thought of by humans as just common street dogs. In the international tax arena, strangely enough McDonalds has some connection to these dogs. We will explore this further in our article, but now back to #PPLI.

PPLI is of course a specialized form of life insurance, and when used properly fulfills the definition of life insurance in all respects. When used as a structure for wealthy international families, it acts more like a trust than traditional insurance.

This can make PPLI difficult to grasp for clients and advisors. If one starts from the six principles of Expanded Worldwide Planning (EWP), PPLI is seen in its true light: an excellent structuring tool for the assets of wealthy international families.

The six principles of EWP

 

Privacy  This is a key element. With FATCA, CRS, and Registers of Beneficial Ownership our clients are looking for ways to keep their affairs private, and still be compliant with tax authorities worldwide. But as you know, it takes study and constant attention to detail to create a proper structure.

 

Tax Shield  In high tax jurisdictions, a tax shield is important. Why pay more tax than is necessary? If there is a PPLI structure than can give you a tax-free environment wouldn’t it be desired by our clients?

 

Asset Protection  Asset protection is an element that almost all clients seek. Making their assets inaccessible to former spouses, creditors, and those seeking to claim them without legal authority. An excellently crafted PPLI structure can also accomplish this for them.

 

Succession Planning  Especially in jurisdictions that have forced heirship rules, succession planning is vital to clients. Most clients wish to distribute their assets according to their wishes and not according to a plan that they don’t agree with.

 

Compliance Simplifier  In today’s world attempting to hide assets only draws more attention to them. Most clients wish to be compliant with the world’s tax authorities, and at the same time keep as much privacy as possible. Finding our way in this maze of regulations is an important element.

 

Trust Substitute  In some jurisdictions, in particular, those that use civil law as opposed to common law, a trust substitute would be useful. Why create an entity that in the end will just be ignored by tax and legal authorities? Why not have a PPLI structure that works both in civil and common law jurisdictions?

 

We will now return to McDonalds and the stray dogs. We give you a few excerpts from Paul Caron’s New York Times article, “EU Ends Inquiry Into Luxembourg’s Tax Deal With McDonald’s.

“The European Union has sparred with multinationals like Apple and Amazon as well as countries such as Ireland in its efforts to curb tax avoidance. In the case of McDonald’s, it is standing down.

The European Commission, the bloc’s executive arm, had been examining whether a deal that Luxembourg granted to McDonald’s may have led to the fast food chain’s paying less tax than it owed. The commission said Wednesday that these deals did not constitute illegal state aid.

The profits under scrutiny had not been taxed in Luxembourg or the United States, according to the commission, but it said that this was a result of a mismatch between the countries’ tax laws rather than special treatment from Luxembourg, and that no rules had been broken. Still, Margrethe Vestager, the European Union’s competition commissioner, said that it was important that Luxembourg change its laws to ensure profits do not go untaxed regularly.”

“Of course, the fact remains that McDonald’s did not pay any taxes on these profits — and this is not how it should be from a tax fairness point of view,” Ms. Vestager said in a statement. “That’s why I very much welcome that the Luxembourg government is taking legislative steps to address the issue that arose in this case and avoid such situations in the future.”

McDonald’s and the government of Luxembourg welcomed the decision from the European Commission.

“We pay the taxes that are owed and, from 2013-2017, McDonald’s companies paid more than $3 billion just in corporate income taxes in the European Union with an average tax rate approaching 29 percent,” McDonald’s said in a statement.”

After carefully following the law, albeit to its own advantage, McDonalds is now cast as a stray dog–as something common and vagrant, certainly not something to be admired. But in one sense it was just being a smart tax payer, trying to pay as little tax as possible, but still following the law. One’s attitude toward McDonalds is, of course, determined by one’s own attitudes toward what is fair and good corporate behavior. Is McDonalds to be judged poorly or judged to be a smart tax payer?

At Advanced Financial Solutions, Inc. we carefully examine the laws and regulations of all the countries of the world, seeking ways to lower your taxes using PPLI. We hope you will join our lists of satisfied clients by seeking our advice on structuring your assets.

We seek to keep you compliant with the world’s tax authorities, and at the same time pay as little tax as possible. Contact us today for a free initial consultation.

 

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 by Michael Malloy, CLU, TEP, @ Advanced Financial Solutions, Inc

 

 

 

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Michael Malloy, CLU TEP in Motion

Travel Defined

Since our founder and chief advisor, Michael Malloy, CLU, TEP, is traveling, we will feature him this week, and a little about his trip to Singapore and Shanghai. First, let us explore the concept of travel. What are the different forms of travel that we experience in our lives?

The obvious one is going from A to B, but there are other forms of travel. Intellectual travel is paramount to working with wealthy international families. Researching and studying the different structuring options that make themselves available when the tax laws of different countries change is an ongoing form of intellectual travel for Advanced Financial Solutions, Inc.  Michael’s CLU and TEP designations are another form of intellectual travel.

According to Investopedia,

“A chartered life underwriter (CLU) is a professional designation for individuals who wish to specialize in life insurance and estate planning. Individuals must complete five core courses and three elective courses, in addition to successfully passing either 100-question, two-hour examinations in order to receive the designation.”

Wikipedia says,

“The Society of Trust and Estate Practitioners (STEP) was founded by George Tasker in 1991 and is the international professional body for advisors who specialize in inheritance and succession.”

The TEP designation is awarded to advisors who have significant involvement at a specialist level with one or more of the following: planning, creation, management of and accounting for trusts and estates, executorship administration and related taxes.

Now onto Singapore and Shanghai with Michael Malloy, CLU TEP. Michael’s time in Singapore by taken up with meetings with advisors exploring ways to use Private Placement Life Insurance (PPLI) structures for Far Eastern clients. The key six elements of Expanded Worldwide Planning (EWP) resonate well in these jurisdictions. Singapore is a truly international financial center for Indonesia, Malaysia, and the PRC.

With the implementation of The Common Reporting Standard (CRS) in the People’s Republic of China (PRC) clients are looking for ways to keep their financial affairs private and still be compliant with tax authorities. Using PPLI is seen as an excellent way to achieve this aim.  In 2019 there will also be new tax laws implemented in the PRC that impact client structures in BVI, the Cayman Islands, and other popular offshore destinations for PRC clients. In discussions with advisors in the PRC, advisors agreed that PPLI can be a valuable tool to assist clients in this area.

Intellectual travel and worldwide travel are both parts of Michael Malloy, CLU TEP’s world. Both are in service to our clients in keeping their affairs as private as possible and be compliant with the world’s tax authorities.

We invite you to explore how PPLI and EWP can greatly enhance the value of your assets. Please contact us for a free consultation to find out for yourself.

Read more about Michael Malloy.

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 by Michael Malloy, CLU, TEP, @ Advanced Financial Solutions, Inc

 

 

 

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Rarity and Value

PPLI Will Take You Home

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Private Placement Life Insurance (PPLI) is a refuge in today’s stormy sea of compliance and tax regulations. When we are distraught and confused our home becomes a safe haven. This is exactly what PPLI does for the assets of wealthy international families.

The rarity of an item tends to give it value. When this item becomes the subject of theft, it can produce more interest, and, even, greater interest if the item is later recovered. This was the case recently with the ruby slippers in the American musical, fantasy film The Wizard of Oz. In the film the ruby slippers have the magically property of taking you Home.

Let us first explore how PPLI creates a safe haven for the assets of wealthy international families. This is best done by diving into the stormy sea of compliance and tax regulations. One understands a subject by the way it is framed. In this case we are speaking about intellectually framing. Let me explain further.

When we wish to go into more depth about a subject, we must first choose a source. How this source of our new knowledge presents the topic becomes part of our new understanding of the topic. This is what I mean by intellectual framing.

Politics gives us a clear example. When we read about a political event from one news source, and, then, read about the event from another news source that has a very different political perspective the two stories can sound very different indeed.

Filippo Noseda of the Mischon de Reya law firm in London is an attorney who is active in privacy issues for wealthy international families. In Trusts & Trustees, “CRS and beneficial ownership registers—what serious newspapers and tabloids have in common,” we think his framing of the privacy vs. transparent issue is excellent. We will express his viewpoint in excerpts from the article.

“The European Data Protection Supervisor (EDPS) published a damning opinion in which he decried the unclear objectives pursued by the AMLDs and, more generally, the invasive nature and lack of proportionality of the proposed registers.”

“As if they were living on planet Europa rather than in Europe, the European Parliament, the Organisation for Economic Co-operation and Development (OECD) and politicians show complete disregard for the warnings raised by their own data protection bodies and instead appear hell-bent on introducing a system of total transparency.”

“Data protection has moved to the forefront of people’s minds, prompting the EU to overhaul the existing data protection rules and has also led to a number of ground-breaking decisions by the European Court of Justice which confirms that the pendulum has started to swing back towards greater protection of privacy and data protection.”

“It is somewhat curious that serious newspapers who have been covering both the private banking scandals and the erosion of privacy seem unable to make the connection between data protection on the one hand, and the CRS and beneficial ownership registers on the other.”

In structuring assets for wealthy international families, the insurance company of the PPLI policy becomes the beneficial owner of the policy’s assets. This structure gives compliance simplification, as what is reported to tax authorities is the total of the assets inside the PPLI, and not the individual assets inside the policy.  At the death of the insured life in the PPLI policy, the assets pass as a tax-free death benefit to the beneficiaries.

Let us return to The Wizard of Oz and the ruby slippers. These magic, ruby, slippers had the property to take you Home once you clicked your heals together three times.  The slippers were stolen thirteen years ago from the Judy Garland Museum in Grand Rapids, Minnesota.  They were recently recovered by the FBI and returned to the Museum.  Of course, this publicity gave the slippers added value, and increased their rarity as something unique.

With PPLI you don’t need the ruby slippers to take you Home. You gain protection from the stormy seas of tax compliance by having your assets inside a PPLI policy, so you are Home from the beginning. You also won’t have your assets taxed, since they are inside a tax-free environment.

We invite your participation in our quest to take you Home to a truly unique structuring tool that has rarity and value. Please write your thoughts and questions at the bottom of the page. If you want to communicate privately with me don’t hesitate to drop me a line: michael@michaelmalloy.solutions

Thank you.

 

 Michael Malloy, CLU, TEP, @ Advanced Financial Solutions, Inc

 

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